July 8, 2005

It Looks Bad

A reader emailed to remind me that First Health Group, the managed-care company given a $30 million raise by Gov. Phil Bredesen's administration after it was found to have violated the terms of its contract as the TennCare program's pharmacy benefits manager - resulting in TennCare overspending - turns out to have been acquired six months ago by a managed care company founded by none other than Phil Bredesen.

In a court hearing Wednesday on Bredesen's TennCare cuts, TennCare Medical Director Dr. Wendy Long testified under cross-examination that TennCare officials earlier this year had considered firing First Health, which is TennCare's pharmacy benefit manager or PBM. But instead, Long testified, after lobbying by high-powered lobbyist Dick Lodge, a former Tennessee Democratic Party chairman and long-time friend-of-Phil, the administration decided to extend First Health's contract without competitive bidding, and tripled the firm's fee from $15 million to $45 million.

Long testified that the firm had mishandled mail and data that affected program integrity and resulted in overspending on TennCare. In addition, Long testified, state officials considered imposing penalties and even discussed finding a new contractor. She admitted that the position of PBM is critical to the ability of the state to carrying out any of the drug cost savings plans or disease management initiatives that the Governor outlined early last year, but has yet to implement.

Additionally, according to the Tennessee Justice Center, internal state documents complain of "foot dragging" by First Health as state officials vainly tried to make the firm meet its contractual obligations. But instead of firing the firm, the state paid another consultant, Schaller Anderson, to take on some of the duties that First Health was already supposed to provide.

In testimony earlier this week at the same hearings, former TennCare director Manny Martins testified that more than a year ago he discussed terminating First Health's contract because the state could not count on any of the firm's data or systems.

First Health was acquired in January by Coventry Health Care, a managed health care company now based in Bethesda, Maryland but founded in the 1980s by Bredesen before he become a politician. Coventry announced the pending acquisition of First Health on Oct. 14, 2004. Bredesen sold his Coventry stock in the 1990s, so he didn't stand to profit directly from giving part of his former company a $30 million pay raise as a reward for its incompetence.

Still, how many of Gov. Bredesen's friends and former Coventry business partners still own stock in Coventry - and benefited financially from that extra $30 million flowing into it?

Connections or no, it simply makes no sense to give $30 million more of taxpayers dollars to a company that has been violating its contract and costing the taxpayers money. But that, apparently, is how this governor, who got rich running HMOS - which profit by rationing healthcare - "reforms" TennCare.
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For more scrutiny of the Bredesen record, see Bredesen Watch.